Pricing of Digital Video Supply Chain: Free versus Paid Service on the Direct Distribution Channel

• Main Authors: Yunhyoung Kim, Jeonghoon Mo
• Format: Article
• Language: English
• Published: MDPI AG 2018-12-01
• Series: Sustainability
• Subjects: digital video supply chain; media publisher; media aggregator; distribution channel; paid service; free service
• Online Access: http://www.mdpi.com/2071-1050/11/1/46

Media publishers that have commonly relied on profits from advertisements and content sales to fund their operations are not only content providers (manufacturers) to media aggregator platforms (retailers) but are also competing service providers (rival retailers) in the digital video supply chain. Different from a traditional media supply chain, they can easily operate their own direct distribution channels in the Internet era. In the digital video supply chain, it is not clear whether commercialization of the direct distribution channel would be beneficial for the media publisher because it would decrease profits from advertisements. The choice about commercialization should be investigated thoroughly because it is closely related to the media publishers’ sustainability as a public medium in a digital environment. In this study, we analyze the impacts of commercializing the direct distribution channel based on a game-theoretic approach. Specifically, we compare the profits of a media publisher with and without the commercialization of the channel from analyses of sequentially defined games. Our results show that media publishers prefer to use a free service on their direct channel if the content they provide is not highly valued. They can also choose not to provide their content to the media aggregator with a paid service.